8.trade secrets

8/11/2019 8.Trade Secrets

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TRADE SECRETS


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What are Trade Secrets

Trade secrets are confidential information that

has commercial value by virtue of being kept

secret and reasonable steps have been taken to

keep it secret.

Idea: By keeping valuable information secret,

you can prevent competitors from learning about

and using it and thereby enjoy a competitive

advantage in the marketplace.


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General principles:

Information that hascommercial

valueand that has been

scrupulously kept confidentialwill be

considered a trade secret (TS).

Owner will be entitled tocourtreliefagainst those who have

stolen or divulged it in an illegal

manner.


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TRADESECRET

Financial

information

Technical &

scientific

information

Commercial

information

Negative

information


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Technical and Scientific Information

product information

technical composition of a product (medicine,

paint, recipe for a sauce), data about product

performance, product design information

manufacture information

manufacturing methods and processes

(weaving technique, device process),production costs, refinery processes, raw

materials, machinery

know-how necessary to perform a

particular operation


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Commercial Information

customer list

business strategies/plans

marketing strategy/researchcustomer buying preferences and

requirements

consumer profiles

sales methods


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Financial, Legal and HR Information

Pricing information

Salary and compensation plans

Employee evaluation


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Secret Documents of a Firm:

Technical data about product performance.

Software development agreements

Pending patent applications

Business plans & strategies

New product names

Financial projections

Marketing plans, unpublished promotional

material


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Secret Documents Of a Firm: (Cont.)

Cost & pricing information

Sales dataCustomer lists

Info re: new business opportunities

Personnel performance

Software design documents


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Three essential legal requirements:

1. The information must be secret

2. It must have commercial valuebecause itssecret

3. Owner must have taken reasonable stepsto

keep it secret


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1.Secret

Not required that be known only by

one person

e.g. based on supplier relationship, joint development

agreement, etc.


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2. Commercial value

Must confer some economic benefit on the holder

This benefit must derive specificallyfrom the fact that

it is not generally known (not just from the value of

the information itself)

How to demonstrate:

benefits derived from use

costs of developing the TS


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3. Reasonable steps

you cannot have a TS unless you have

taken reasonable precautions to keep the

information confidential

Reasonablecase by case reasonable security procedures

Non-disclosure agreements (NDA)

such that the information could be obtained

by others only through improper means

Importance of proper TS management

program


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How are trade secrets stolen?

A Growing Problem. Why Does It Occur?

Way we do business today (increased use of

contractors, temporary workers, out-

sourcing)

Declining employee loyalty: more job changesOrganized crime : discovered the money to

be made in stealing high tech IP

Storage facilities (DVD, external memories,

keys)

Expanding use of wireless technology


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departing or disgruntled employees

intentional (malicious)

by ignorance

80% of trade secret loss

< employees, contractors, trusted

insiders!


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Factors to determine if information is a TS

(Cont.)

What is the potential value for your competitors?

How much effort/money spent in developing it?

How difficult would it be for others to acquire,

collect of duplicate it?


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2. Develop a protection policy

Advantages of a written policy:

Clarity (how to identify and protect)

How to reveal (in-house or to outsiders)

Demonstrates commitment to protection

important in litigation


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3. Restrict access

to only those persons having

aneed to know

the information

computer system should limit each

employees access to data actually

utilized or needed for a transaction


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4. Mark documents

Help employees recognize TS

prevents inadvertentdisclosure

Uniform system of marking

documentspaper based

electronic (e.g. confidential

button on standard email

screen)


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5. Physically isolate and protect

Separate locked depository

Authorization

Access control

log of access: person, document reviewed

Surveillance of depository/company premise

guards, surveillance cameras

Oversight; audit trail


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6. Maintain computer secrecy

Secure online transactions, intranet, website

Password; access control

Mark confidential or secret (legend pop, or

before and after sensitive information)

Physically isolate and lock: computer tapes,

discs, other storage mediaNo external drives and USB ports

Monitor remote access to servers

Firewalls; anti-virus software; encryption


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Trade secret audit

Conducting an TS audit is to determine

whether or not you have any trade secret

assets; then to identify them; and final to

take measures to make sure they retaintheir status as protectable trade secrets

Should be done periodically

Teamtrusted people who know the

company


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Why should you conduct a TS audit

Identify assets that would otherwise be

unknown

By identifying and protecting prevent their

loss

A court is more likely to give TS status to

information identified internally as TS

Establish clarity


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Patent or Trade Secret Protection

Such information may qualify for patent

protection or trade secret protection. A

company may choose trade secret

protection even for information that qualifyfor patent protection.


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Trade Secrets or Patents

No registration

(costs/time factor)

Duration is not limited

to specified period oftime

No disclosure

Wider information

Difficult to enforce

No protection against

independent

discovery

Registration required

(cost/time factor)

Limited duration

Disclosure required

Limited to claims

Easier to enforce

Exclusive rights


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1.ANYinnovative idea should be kept

as a secretin the beginning

to preserve option of patenting (or industrialdesign) at later stage

Things to bear in mind


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2- Choice between patent or TS

must be made both fromlegal

andbusiness perspectives

(if patentable)


(Cont.)


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3. Once patent publishedTS lost

in ALL COUNTRIES

patent documents easily

accessible to public

if patent application published and

later rejected you lose both patent

and TS rights


(Cont.)


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Remember...

No need for absolute secrecy, but

reasonable measures

Developing and maintaining TS

program< good business practice to prevent


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TS: Only legal protection against

dishonest

acquisition/disclosure/use

You can use someone who violated

your TS, but that often doesnt save

the TS

Consider alternative protection

Remember...


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The choice between TS and

patent protection for an invention

is a turning point.Therefore: carefully consider all

relevant advantages and

disadvantages from each choiceboth from legal and business

viewpoint

Remember...


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Patent and TS are often

complementaryto each other:

Patent applicants generally keep inventions secretuntilthe patent application is publishedby the patent

office.

A lot of valuable know-how on how to exploita

patented invention successfully is often kept as a trade

secret.

Some businesses disclose their trade secret to ensure

that no one else is able to patent it (defensive

publication).

Remember...


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As to whether TS or patent is the moreappropriate protection depends on thekind of product, nature of the business and

the policies of the company.Some products have a short commercial

life (TS better), some information may bedifficult to keep secret and some productsmay be more easily reverse engineeredthan others (patent better).


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Remedies

Civil remedies based on breach of contract

or tort law; damages, injunctions, seizures

and impoundment

Criminal remedies - rarely a criminal

offense in its own right but could attract

criminal liability by committing criminal

offenses for procuring the information(theft, trespass etc)


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Final thought

You may not know that you have valuable

business information recognized by law as

trade secrets till it is too late.

Identify and protect them

They may be the key to your

competitiveness